To Renew or Not to Renew? What AGOA Means to Apparel Sourcing
Jasmin Malik Chua
5 min read
“China plus one” is no longer a prudent sourcing strategy. Could Africa benefit from the scramble to diversify supply chains, particularly in the face of impending—and increasing—Chinese tariffs?
It’s a question with no easy answers, as a session at Sourcing Journal’s Fall Summit concluded last week. For one thing, with 54 different countries, Africa is far from a monolith that can be tackled with a one-size-fits-all approach.
For another, there’s the nettlesome problem that is the non-renewal of the Africa Growth and Opportunity Act, a.k.a. AGOA, which is poised to expire in September. Without the duty-free benefits that the trade preferences program provides to nations such as Ghana, Lesotho, Mauritius and South Africa, apparel purveyors have fewer incentives to turn to the continent, particularly for U.S. firms that have as many as 100 sourcing destinations to make all manner of SKUs. And as far as Africa goes, less isn’t more.
“If you compare those products we import from Asia versus from AGOA, AGOA is mostly about basic products,” said Sheng Lu, professor of fashion and apparel studies at the University of Delaware.
Even with AGOA’s so-called “third-country fabric rule,” which allows eligible countries to import textiles from anywhere in the world and still qualify for preferential treatment for their finished goods, the bulk of AGOA imports comprise cotton or polyester rather than more specialized fibers such as viscose spandex. This, to Lu’s point, limits Africa’s export competitiveness in the absence of anything else to sweeten the deal.
Take the cautionary tale of Ethiopia, which lost its AGOA beneficiary status in 2022 due to human rights concerns, Lu said. In the two years since, the country’s apparel imports to the United States have tumbled by one-third.
“So that’s why the immediate renewal of AGOA is important,” he said.
AGOA is unlikely a “high priority” for the incoming Trump administration, admitted Greg Poole, former chief supply chain and sourcing officer at The Children’s Place. The children’s wear maker started exploring Africa in 2012 after realizing that its outsized dependence on China was a “huge risk,” not only in terms of geopolitical tensions but also rising labor costs.
The Children’s Place saw in the continent a “young and vibrant workforce,” and a “supportive group” of governments that wanted to grow their textile and apparel industry as a way to transition from an agriculture-dependent economy.
But while “we need to continue to push to get it renewed,” Poole said of AGOA, he also noted that some Ethiopian manufacturers have been able to continue to produce and be globally competitive without its benefits. He said that AGOA was always meant to serve as a temporary trade agreement that allowed manufacturers to establish themselves and “become efficient,” meaning at some point, they should “probably be weaned off.”
Creating a garment manufacturing ecosystem first in northern Africa, then its east and west hasn’t been without its challenges, said Vikas Budhiraja, senior vice president at Arise IIP, an industrial “real estate agency” that builds economic zones across Africa to foster local processing and promote international trade. Most of the continent’s apparel footprint is in ready-made manufacturing. It’s less so in more “vertical” operations such as spinning, weaving, knitting or dyeing.
“The main reason being, in spite of having close to 2 million tons of cotton, 90 percent of the cotton has been exported to Asian countries—Bangladesh, Vietnam—for [Cotton Made in Africa] and other varieties of cotton, and hardly less than 5-10 percent of cotton being processed out there in Africa itself,” he said.
This is a gap that Arise IIP has been working to bridge through its textile parks in Benin, Togo and elsewhere. Upskilling workers through training programs has likewise been a priority.
“That’s how we are [taking] a catalytical approach to the vertical integration in the region, which is not only helping to make the brands and retailers source from that region, but also helping the other manufacturers around that region source their yarn, fabrics and other textile requirements from the park itself,” Budhiraja said.
In the process, Arise has been able to attract interest from manufacturers from Bangladesh and China looking to set up bases in West Africa, “which was never the case earlier,” he added.
Still, corporations do not thrive in uncertainty. Without a decision on AGOA’s renewal, brands and retailers will be more hesitant to opt for Africa, Lu said.
“If you’re talking to them at this point, they’re already making sourcing plans for next spring or even fall,” he said. “If you do not renew this agreement right now, then probably it’s not in time for companies to continue to source from the region.”
Poole pointed out that many people still have very dated ideas of what Africa that are at odds with reality. Case in point: Few seem to realize that production facilities aside, the region houses a growing consumer market, with consumer and business spending projected to reach $5.6 trillion by 2025.
“When you say to them, ‘Hey, we’re going to Africa,’ people go, ‘What?’ And they sort of think about what Ethiopia was like 30 years ago,” he said. “Today it’s so very different: the level of technology, the infrastructure, the vertically integrated factories that Arise has built are state of the art.”
“I think it’s about perception,” Poole added. “And the only way to overcome perception is to go there and visit. You have to go there to see it and believe it.”
